Ten Things I'd Do Differently as a Law Firm CEO

Expert Guest Blog Entry by Timothy B. Corcoran  There are many good reasons for law firms to adopt business practices from other industry segments.  As has been made abundantly clear, the laws of economics apply equally to law firms as to other businesses.  Faced with declining demand and an oversupply of providers, law firms are experiencing unprecedented downward price pressure and clients are aggressively seeking substitutes.  Law firm leaders who have reduced overhead to maintain profit margins have learned that this approach falters when adverse economic conditions persist.  Many law firm leaders now struggle with what to do next to survive.  Alternative fee arrangements are still considered necessary evils, rarely embraced but reluctantly accepted upon client demands.  Growing top line revenue through lateral recruiting remains a risky proposition because there is no guarantee a lawyer’s clients are as portable as the lawyer.  Too, a lesson most of us learned as teens applies to lateral love affairs:  the pretty girl too popular to commit to one guy is, statistically speaking, unlikely to stay with you for very long either.  Lawyers, not unlike their forbears in other industries facing massive upheaval, tend to do more of what they know rather than proactively seek change, and as a result simple techniques to improve client satisfaction and retention — efforts that in other industries are generally called “sales” — are discarded as unseemly or unnecessary for educated professionals to take on. Law firms are not mere factories, churning out countless replicas of a popular product.  Nor are they think tanks focused on producing thought leadership for academics to ponder.  But law firms are somewhere on that continuum, subject to market forces, facing changing client needs, price pressure from entrenched competitors and constant innovation from new entrants.  Few law firm leaders have sufficient experience to navigate this maze.  But there is hope.  Unlike the leaders of, say, print encyclopedias, whose business model was disrupted by the unprecedented speed and force of the Internet, law firm leaders have plenty of corollary lessons to draw on to chart a course from fear to prosperity.  To be clear, I don’t believe a law firm should be run primarily as a business.  I’ve been a CEO of a publicly-traded company and I climbed the corporate ladder in divisions of private and public multi-national corporations and there is a common thread:  the business school maxim that earning a profit is the primary goal is interpreted primarily as a toxic quest for short-term profits above all else, including the long-term health of the business, typically because executive incentive plans are pegged to short-term profit measures.  A law firm can generate a healthy profit, which is not a shameful goal, while simultaneously improving client satisfaction and work product quality, and building a sustainable culture for the long haul.  But how? Here are ten ideas drawn from my own corporate experience that law firm leaders can embrace to improve the fortunes of their firms. Change the governance model.  Let’s first dispense with the arcane notion that a partnership is an effective or efficient management structure.  Notwithstanding any potential tax or liability benefits of the business form, it is ridiculous to believe that all partners should have an equal say in the operations of the business, particularly after an organization reaches a certain size.  Nor is a dictatorship acceptable, even when led by a benevolent leader, because such organizations lack sustainable business processes and falter when the leader inevitably departs. Identify a core leadership team at the firm and practice group level and give them the authority to lead.  Stop allowing the blowhard down the hall to substitute his childish behavior for sound business practices.  Stop crowd-sourcing important decisions.  Speed up the decision process by eliminating needless voices.  Let the lawyers practice law and the leaders lead.

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Tags: Benchmark, Law Firm, Management